If tax debt is a substantial portion of your liability and you can qualify, you may want to consider filing a Chapter 13 bankruptcy. Even if the taxes are secured, the majority of courts have held that tax penalties are not secured and are never a priority. The reasoning is that the courts are not willing to penalize the unsecured creditors by giving priority to the penalties. This also applies to interest that has accrued on the penalties. Therefore, the superdischarge remains in effect for tax penalties and the interest that accrues thereon no matter when assessed or when the triggering event happened. (Section 523 (a)(7)(A) and (B); and Section 1328(a). Contrast this with chapter 7 where penalties are dischargeable only if the triggering event causing the penalty is over 3 years old.
